Disconfirming evidence

Information that would make your thesis wrong - facts you would have to explain away rather than cite.

Example

For 'this company dominates its niche', disconfirming evidence is a competitor quietly winning the same customers, or the niche itself shrinking.

Important

Writing down in advance what would change your mind is what turns disconfirming evidence into something you can act on, instead of something you argue with.

Related terms

  • Confirmation bias — The habit of seeking, believing and remembering information that supports what you already think, while discounting information that does not.
  • Variant perception — A view that differs from what the market price already reflects, in a specific way you could check.

Lessons that explain it

  • What you were told, what you inferred, and what you checked — Almost everything that later turns out to be wrong was never actually verified - it was assumed, because it arrived alongside things that were true. (10 min)
  • Sort what you know from what you assume from what nobody can know yet — Before deciding, separate verified evidence, assumptions that could be tested, and genuine unknowns. The decision is about whether the unknowns are acceptable at this price. (10 min)
  • If you cannot write a good bear case, you do not understand the deal — A bear case built from generic risk categories teaches nothing. A bear case built from 'what would have to be true' names the specific number the whole thesis depends on. (12 min)
  • Amend, date and keep the original - never quietly rewrite — A memo is a record of reasoning at a moment. When facts change, add a dated amendment rather than editing the original, so the evolution of your thinking stays visible and reviewable. (10 min)
  • If nothing could prove you wrong, you have not said anything — A thesis becomes useful at the moment it names what would refute it. This is how to write that line so it is checkable rather than rhetorical. (12 min)
  • The annual hour that decides whether you learn anything — A thesis that is never reviewed is a belief you happen to have held for years. The review is where a written thesis converts into judgement, and it has to separate what you got right from what merely worked. (11 min)

All 578 terms in the Investing glossary